“Shared prosperity” is a common phrase in current development policy discourse. Its most widely used operational definition—the growth rate in the average income of the poorest 40% of a country’s population—is a truncated measure of change in social welfare. A related concept, the shared prosperity premium—the difference between the growth rate of the mean for the bottom 40% and the growth rate in the overall mean—is similarly analogous to a measure of change in inequality. This article reviews the relationship between these concepts and the more established ideas of social welfare, poverty, inequality, and mobility. Household survey data can be used to shed light on recent progress in terms of this indicator globally. During 2008–2013, mean incomes for the poorest 40% rose in 60 of the 83 countries for which we have data. In 49 of them, accounting for 65% of the sampled population, it rose faster than overall average incomes, thus narrowing the income gap. In the policy space, there are examples both of “pre-distribution” policies (which promote human capital investment among the poor) and “re-distribution” policies (such as targeted safety nets), which when well-designed have a sound empirical track record of both raising productivity and improving well-being among the poor.
Francisco H. G. Ferreira, Emanuela Galasso, and Mario Negre
James P. Ziliak
The interaction between poverty and social policy is an issue of longstanding interest in academic and policy circles. There are active debates on how to measure poverty, including where to draw the threshold determining whether a family is deemed to be living in poverty and how to measure resources available. These decisions have profound impacts on our understanding of the anti-poverty effectiveness of social welfare programs. In the context of the United States, focusing solely on cash income transfers shows little progress against poverty over the past 50 years, but substantive gains are obtained if the resource concept is expanded to include in-kind transfers and refundable tax credits. Beyond poverty, the research literature has examined the effects of social welfare policy on a host of outcomes such as labor supply, consumption, health, wealth, fertility, and marriage. Most of this work finds the disincentive effects of welfare programs on work, saving, and family structure to be small, but the income and consumption smoothing benefits to be sizable, and some recent work has found positive long-term effects of transfer programs on the health and education of children. More research is needed, however, on how to measure poverty, especially in the face of deteriorating quality of household surveys, on the long-term consequences of transfer programs, and on alternative designs of the welfare state.
Kamal Saggi and Olena Ivus
Longstanding international frictions over uneven levels of protection granted to intellectual property rights (IPR) in different parts of the world culminated in 1995 in the form of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)—a multilateral trade agreement that all member countries of the World Trade Organization (WTO) are obligated to follow. This landmark agreement was controversial from the start since it required countries with dramatically different economic and technological capabilities to abide by essentially the same rules and regulations with respect to IPRs, with some temporary leeway granted to developing and least developed countries. As one might expect, developing countries objected to the agreement on philosophical and practical grounds while developed countries, especially the United States, championed it strongly. Over the years, a vast and rich economics literature has emerged that helps understand this international divide. More specifically, several fundamental issues related to the protection of IPRs in the global economy have been addressed: are IPRs trade-related? Do the incentives for patent protection of an open economy differ from those of a closed one and, if so, why? What is the rationale for international coordination over national patent policies? Why do developed and developing countries have such radically different views regarding the protection of IPRs? What is the level of empirical support underlying the major arguments for and against the TRIPS-mandated strengthening of IPRs in the world economy? Can the core obligations of the TRIPS Agreement as well as the flexibilities it contains be justified on the basis of economic logic? We discuss the key conclusions that can be drawn from decades of rigorous theoretical and empirical research and also offer some suggestions for future work.
In many countries of the world, consumers choose their health insurance coverage from a large menu of often complex options supplied by private insurance companies. Economic benefits of the wide choice of health insurance options depend on the extent to which the consumers are active, well informed, and sophisticated decision makers capable of choosing plans that are well-suited to their individual circumstances. There are many possible ways how consumers’ actual decision making in the health insurance domain can depart from the standard model of health insurance demand of a rational risk-averse consumer. For example, consumers can have inaccurate subjective beliefs about characteristics of alternative plans in their choice set or about the distribution of health expenditure risk because of cognitive or informational constraints; or they can prefer to rely on heuristics when the plan choice problem features a large number of options with complex cost-sharing design. The second decade of the 21st century has seen a burgeoning number of studies assessing the quality of consumer choices of health insurance, both in the lab and in the field, and financial and welfare consequences of poor choices in this context. These studies demonstrate that consumers often find it difficult to make efficient choices of private health insurance due to reasons such as inertia, misinformation, and the lack of basic insurance literacy. These findings challenge the conventional rationality assumptions of the standard economic model of insurance choice and call for policies that can enhance the quality of consumer choices in the health insurance domain.